Why the licence fee isn’t the best way to fund the BBC
In making his case, Heath suggests that he welcomes debate on this subject. He then begins the first article by using the old trick of defining that debate in his own terms. ‘What the BBC is for and how it should be funded are inextricably linked’, he says. Too true. But what he thinks the BBC exists for is taken as a given: ‘universality and social value, great programmes at an affordable price, creative sector investment, and independence.’ Hence, in James’s view, all funding mechanisms for the Beeb must be judged against these criteria.
I’m sorry, but this won’t do. Those of us who do not believe in the licence fee of course recognise that the role of the BBC and how it should be funded are linked. But where we fundamentally disagree with James is on the role of the BBC in a modern economy and society.
Indeed, one of the key arguments against a sustained role for a licence fee is that we find ourselves in a very different world from the early post-war period when an annual tax-like TV licence for a monopoly public service broadcaster made sense. TV broadcasting then had the features of what economists call a public good – it was non-rivalrous and non-excludable. Since signals were transmitted free-to-air via masts, one person watching the BBC didn’t affect the ability of others to do so. And it was hard to prevent someone from tuning in. So it made sense to create a separate funding stream to preserve BBC independence in a universal way for all those owning televisions, given the potential for free-riding and as a means of guaranteeing revenues for the state-owned monopoly.
Then, the licence fee could genuinely be described as the ‘least worst’ option for funding a monopoly public service broadcaster. Yet since then so much has changed. Broadcast media is now more diverse – a raft of commercial operators have shown it is possible to survive and thrive without recourse to a compulsory imposed charge. In other words, the BBC is no longer a monopoly. Many of the commercial rivals produce content indistinguishable from the sorts of programmes the BBC seeks to produce: from news to documentaries, dramas, sports coverage through to festival coverage. What’s more, technology has rendered the public good argument obsolete – one can exclude people from watching if they do not pay, through digital decoders. In other words, broadcasting has become a ‘club good’. People can be excluded from its services and different organisations can provide different bundles of services which we can choose to purchase or not.
Given all these changed conditions then, my starting point is not: ‘what is the best means of funding the BBC given its current remit?’ but rather ‘Is there any remaining justification for a “universal” public service broadcaster at all?’ Given the existence and success of other commercial operators, and the easy availability of news and current affairs information elsewhere, it is difficult to answer in the affirmative. Indeed, to think about this more clearly: if the BBC did not already exist, would anyone today seriously suggest creating it? Or, if they did, would they seriously suggest the need for the sort of ‘universal’ service the BBC provides?
Heath argues that the BBC operates for ‘the common good’, ‘creating a richer culture, promoting democratic debate and building a stronger sense of community through shared experiences’ which are ‘universally available to all’. But this is increasingly challengeable. The BBC model is a reflection of a bygone collectivist age, where the population had endured the collective effort of World War II and when there was a fairly homogenous society. In a more diverse age – in particular where other sources of information are easily available, it’s more a source of conflict than a unifier.
Everybody believes the BBC is biased against them (see Gaza coverage, the debates over welfare reform, discussion of the EU etc). We would never complain that the Guardian is biased because we know its broad worldview and can judge what it says against that. The BBC on the other hand has to labour under the pretence of impartiality, when in fact all editorial decisions of what to cover and how to cover it entail partial judgments.
Any sense of community that the Beeb does engender is not natural and spontaneous, but enforced. The BBC’s output is only universal to those who do watch television because the licence fee that funds it is compulsory, with (until new proposed legislation is passed) criminal charges resulting for those found to have watched television without having purchased one.
On content too, the ‘common good’ social capital argument is a bit thin. Given the plethora of channels available on most digital boxes and the ability to watch on-demand, the idea of ‘shared experiences’ as a form of social or cultural capital – the idea that we all sit around at the same time to watch the same shows and then perhaps discuss them all together – is looking increasingly obsolete. In this regard, the idea that this universality is ‘socially just’ looks more like just a desperate plea. In fact, Heath’s logic would suggest that rather than subsidising the BBC the government should subsidise programmes like ‘Game of Thrones’ – the real ‘watercooler conversation generator of the moment, which could be said to be contributing to social capital building. That it doesn’t shows that social capital building and ‘shared experience’ can arise from market-based activity already. Let’s call it the ‘blockbuster phenomenon’.
No, the only real justification for the maintenance of a public service broadcaster would be to show that the BBC provides things which other market operators could not or would not. Beyond children’s television (which has been killed off on commercial stations by advertising regulation), and perhaps a handful of news and current affairs programmes, it is difficult to think of many examples where this is the case. In fact, in many areas the BBC uses its privileged position of guaranteed revenues to directly compete in areas where commercial provision works and works well, from bidding to show movies and sports programmes, to cross-subsidising its news website and the provision of local news in direct competition with increasingly hard-pressed local newspapers. There is no real mechanism for consumers to hold the BBC to account for the quality and content of its output and it is undermining other organisations that also contribute to the building up of social capital.
So, even if one accepts the need for public service broadcasting (and I am not convinced) for the provision of programmes that otherwise would not be produced by the wider broadcast market, it is difficult to justify anything more than a radically smaller BBC – perhaps one television channel and one national radio station. This would justify a very low licence fee, ring-fenced from the subscription or advertising revenue that the BBC would have to raise for anything else which it wanted to continue doing. In fact, one could argue that there is no reason to allow the BBC even to have a monopoly over this content either – one could envisage a situation where funding is distributed for public service broadcasts to commercial operators on a competitive basis in the same way that the Arts Council operates its subsidies. But there is very little argument for a public service broadcaster, and hence a licence fee, to fund the all-singing, all-dancing BBC that we see today.
Nevertheless, Heath does try. He dismisses the argument that technology is rendering the licence fee obsolete anyway by saying that we should be wary of technological determinism. But this just dodges the questions posed. The key insight that the likes of Professor Tim Congdon have consistently made is that computers, tablets and now even mobile phones are televisions, in that people can use them to watch television content. Should we really be seriously considering extending the TV tax to all of these devices, at a time when we are trying to embrace a digital age, so that someone can’t watch ITV online without having first paid his dues to the BBC? And if not, and if we are instead discussing the potential for a log-in or password based system for catch-up services and non-TV viewed TV, then why can’t that system be used on a subscription basis? Heath does not address these important questions.
Instead, Heath uses four further and ‘softer’ justifications for the licence fee: that it is a ‘shared investment’, that the licence fee provides incentives to serve the needs of everyone and invest in new content, that it makes the BBC accountable to viewers, and that it is efficient and does not neuter consumer choice.
The BBC is a shared investment in the sense that we are all forced to pay for it, irrespective of whether we want it. Heath argues that this makes it a form of mutual security, like healthcare. Whatever one’s views on the NHS, it is self-evident that one can envisage situations where you might suffer an unexpected event that requires medical treatment, which, if you haven’t pre-insured or got an NHS in place, might mean prohibitively high costs and potential catastrophe. Insurance makes sense. If in the unexpected event someone who previously didn’t want to watch the BBC now did so, the cost of subscription is unlikely to be prohibitively high or unpredictable. So, what exactly is the BBC licence fee providing us with mutual security against?
Instead the socialised, collective provision model of the BBC necessitates it providing different content to try to appease all of its potential viewers, in order to justify its own position. Heath argues that this is a good thing – a ‘democratic incentive to engage with and reflect the needs of every not just a few’. Yet it’s unclear why all this cross-subsidy is necessary. I like sport. I would much rather have a much lower licence fee charge each year and be able to use the money saved to purchase BT Sport and ESPN to supplement my Sky Sports package. Lionel Robbins once described capitalist competition as the process by which ‘thousands of people cast their votes for the hundreds of products and services on offer, and from the competition to win their votes, better and better products and services arise.’ In that sense, a free market in broadcasting would be truly democratic and the BBC licence fee is a roadblock to achieving this. There is nothing democratic about someone in the BBC deciding what to produce divorced from the wants and needs of customers – and it is vastly economically inefficient. In modern broadcasting, it is simply not necessary for one broadcaster to provide a full range of services, any more than it is necessary for this one blog to cover every issue from economics to basket weaving.
The BBC licence fee as guaranteed income means the Beeb cannot ever be truly accountable to its viewers in the way that a commercial enterprise generating its own revenue would be. This is not only true in terms of the types of programmes the BBC produces, but also how it spends its money. Heath likes to talk about this lack of constraint as enabling the BBC to look beyond what people want and to act as a vehicle for ‘risk capital’ for the British creative sector. He highlights the fact that ‘over 40% of total investment in UK original content’ comes from them. Yet industrial subsidies of this kind have long been recognised by economists as deeply perverse, driving up costs and leading to content tailored to the demands of the middlemen of the BBC rather than customers themselves. Sure, with the amount of money involved the BBC may produce some good content along the way. But what we don’t see is the crowding out, the money that would have been invested elsewhere, by the BBC or other commercial companies, in the television or indeed other goods and services that we as consumers desire.
Heath argues that the BBC licence fee doesn’t neuter consumer choice. We’d only really know this, of course, were it to be abolished. If Heath were right, we’d expect the vast majority of people to continue to pay the subscription charge and so the BBC would have little to fear. The fact that the Beeb is evidently so concerned about the possibility of the licence fee being scrapped suggests, however, that this is not the case. Yet if there are many people who would not pay a BBC subscription charge in the event of the licence fee being abolished, this alone shows that its prior existence did indeed have a big impact on consumer choice.
The licence fee does of course allow the BBC to be ‘independent’ from government – though this is true only in a superficial sense – but this would be equally true under a subscription model. And the public are increasingly coming round to this idea. Heath cites polling from Ipsos MORI to show that people apparently support the licence fee. But a recent poll by the Whitehouse Consultancy media analysts found 51 per cent would support the idea of abolishing the licence fee and making the BBC fund itself. The answers to this type of survey question tend to be dependent on the wording.
I certainly agree with Heath that the argument about the regressivity of the licence fee is perhaps the weakest argument against it. The real unfairness of it is not that it costs poorer people a higher proportion of their incomes, it’s that there is absolutely no link between the amount you pay and the amount of BBC you are willing to pay for the option to watch – to the extent that you have to pay even if you want to watch no BBC television. This final point may not affect many people, but it seems to me an utterly indefensible principle.
In conclusion then, the arguments in favour of the licence fee are weak – not just because of technology and the changing media market, but also because the justification for the BBC’s existence as a ‘do-all’ public service broadcaster is itself outdated. One can sense that the tide is beginning to turn on this issue, and the Beeb will have to come up with better arguments if the licence fee is to survive beyond the medium-term.